tv Nightly Business Report PBS July 27, 2010 1:30am-2:00am EDT
>> the real question is whether or not this is something that a single c.e.o. can change direction of such a big ship as b.p., whether or not the cultural problems at b.p. are so pervasive that it may not be fixable. >> tom: a change at the top? it looks like embattled b.p. c.e.o. tony hayward is on the way out and an american, robert dudley, is on the way in. >> susie: but will that change be enough to give b.p. a new start and a new strategy for the disaster in the gulf? you're watching "nightly business report" for monday, july 26. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening everyone. b.p. could soon have a new boss. there are reports that tony hayward will step down as c.e.o. in october. tom, the man expected to move into that job is robert dudley. he's been overseeing the spill operations in the gulf of mexico. if he gets the job, he'll be the first american to run the british oil giant. >> tom: susie, b.p. stock surged almost 5% on the rumors.
reportedly, b.p.'s board met today to discuss the management change and is expected to make an announcement tomorrow. >> susie: hayward has been criticized for his missteps and mishandling of the massive oil spill. and, as stephanie dhue reports, it may take more than a change at the top to fix b.p.'s problems. >> reporter: tony hayward had more than his share of blunders >> i had no problem with drilling of this well. i think it's too early to reach conclusions. i don't know. i simply was not involved in the decision making process. >> reporter: but the jury is still out on how much switching c.e.o.s will change things. hayward was brought in three years ago to address safety concerns after a major oil spill in alaska and a deadly explosion at b.p.'s texas refinery. but then, as now, experts say b.p. has to change more than its c.e.o. industry observer lou pularesi
says that kind of change takes time. >> to develop a culture of safety takes a real commitment, and it's not just money, it's having the technical competence, looking at all your operations, having everyone with confidence that they can shut down the rig and change the procedure. >> reporter: hayward's likely replacement, american robert dudley, has 32 years in the oil business. he joined british petroleum when the company bought amoco in 1998, and was in charge of operations in russia before taking over the gulf cleanup effort last month. public citizen energy director tyson slocum says dudley has to change a culture that appears to compromise safety for profit. >> we need to see that dudley is going to address that head-on and reshape the company from the ground up. this is a company that needs a wholesale makeover, not just a facelift. >> reporter: before that happens, the company still has to plug the well in the gulf of mexico, clean up the mess, and compensate businesses and
individuals and governments for damages. white house spokesman robert gibbs warned hayward's departure won't change that. >> regardless of who leads the company, these obligations and responsibilities must be met. >> reporter: while hayward is expected to depart in october as c.e.o., he won't be completely out of the picture. he's expected to lead b.p.'s joint venture project with russia. stephanie dhue, "nightly business report," washington. >> susie: tomorrow, we'll find out how the disaster in gulf has affected b.p.'s bottom line, when the oil giant reports quarterly earnings. excluding spill costs, b.p. is expected to earn $1.42 a share on revenue of $72.5 billion. that's up 28% from last year. >> tom: here are the stories in tonight's n.b.r. newswheel: stocks started the week with a boost following some good news about the economy. the dow jumped 100 points, the nasdaq rose 27 and the s&p 500 gained 12 points.
volume on the big board and the nasdaq backed off from friday's pace. the good economic news was new home sales. they rebounded in june from the record low hit the previous month, but still remained weak. the commerce department says new home sales jumped nearly 24% last month, to a seasonally adjusted pace of 330,000. that's slightly better than what analysts expected. may sales were revised downward to 267,000, that's the slowest pace on record, dating back to 1963. i.b.m. has been reshaping itself into a technology services firm, but its computer mainframe operations are the focus of a formal investigation in europe. the european union is looking into claims i.b.m. abused its dominant position in the market for mainframe computers. the company is accused of tying sales of its hardware to its software for mainframe computers. i.b.m. says the investigation has no merit. >> tom: still ahead: stocks, bonds, commodities, mutual funds, e.t.f.'s, c.d.'s, real estate... what can happen to investors when there are too
many choices. >> susie: in a sign of confidence for the global economy, fedex raised its earnings outlook for the current quarter, as well as the full year. that's $0.20 higher than previous forecast. it raised full year guidance. now the world's second largest package delivery company credits rising demand among other factors. erika miller looks at whether it's a sign the recovery is shifting to a higher gear. >> reporter: forget about jobless claims or housing data, if you want to know the outlook for the economy, pay attention to earnings at fedex and rival u.p.s. morningstar analyst keith schoonmaker says those companies are the first to notice changes in demand worldwide. >> both of these firms-- the integrated shippers u.p.s. and fedex-- which we are so familiar with in the us, both of them derive more than a quarter of their revenue from their international operations. so it's certainly fair to call both of them global indicators. >> reporter: today, fedex said
it is seeing a "pick-up" in international shipments, particularly its higher-margin priority deliveries. but it's not clear whether the demand is coming from consumers or businesses >> i think a large part of it is going to be businesses at this point. we don't have a full revelation from the firm on what the breakdown is between these two. but, at this point, it seems to us it's going to be the b-to-b clients have been responsible for a big portion of the growth. >> reporter: analysts hope to find out more when fedex officially releases quarterly results september 16. the fedex news comes on the heels of strong earnings from u.p.s. last week. that company also raised its profit outlook for the full year, citing improving global demand. economist brian levitt sees rising shipments as a vote of confidence for the u.s. recovery. >> these improving profits you see at companies like u.p.s. and federal express is a very positive sign. it's a signal that there is economic activity around the world, the global economy remains healthy. the us economy is not likely to head into a double-dip
recession. >> reporter: august and september are typically strong months for fedex and u.p.s., as retailers stock up on fall merchandise. economists hope shipments will be strong, a sign consumers are starting to spend again. erika miller, "nightly business report," new york. >> susie: one of the most successful vehicles in ford motor's history had a second coming out party today: the explorer. the new version is more fuel
efficient and has more safety features than the sport utility that took the country by storm two decades ago. but, as diane eastabrook reports, this explorer faces a lot more competition than its predecessor. >> reporter: ford's 2011 explorer got a multi-city rollout in places like chicago, where it will be built, and in miami's fashionable south beach, where its beefier design will hopefully attract hip, urban buyers. the new explorer is five inches wider than the previous model. despite its bulk, it has better fuel economy. the sport utility is built on the same platform as the taurus sedan, making it about 20% more fuel efficient than this year's model, which was built on a truck platform. that, says company chairman bill ford, could make the explorer and his company standouts in the global auto industry. >> i think it's impossible to envision a scenario globally when fuel becomes cheaper and more plentiful.
and so the bet we're placing is we want to be the fuel economy leader in every segment we participate in. >> you can see some very sculpted lines here and a very fast windshield. >> reporter: jim holland is the explorer's chief engineer. he says aerodynamics and lighter-weight materials help fuel economy. he also points out how new features, like a terrain management system, lets the vehicle drive almost anywhere. >> depending on what surface you're on-- it can be snow, mud or gravel, or sand-- you pick the setting, it takes care of everything else. >> reporter: ford has sold six million explorers since it rolled out the s.u.v. 20 years ago. then, the vehicle was a game- changer, marrying the utility of a truck with the luxury of a sedan. but, in recent years competition and volatile gas prices have eroded explorer sales. they peaked at nearly a half million in 2000, but have been declining ever since. while optimistic about the new explorer, bill ford doubts the vehicle will drive the sales numbers it did a decade ago. >> our expectation for this is nowhere near that. we haven't announced volumes,
but that's not our plan. we do think being best-in-class with fuel economy, and in safety and in overall capability will make this a very hot vehicle. >> reporter: morningstar auto analyst david whiston says how well the new explorer sells will depend on consumer expectations and price. >> in the new explorer's case, if the design is there and the power is there, and the value... what you get is what you pay... if that's there, then it will appeal to consumers who want a larger vehicle. >> reporter: the explorer will hit showrooms later this fall. ford hasn't announced a price, but says it will be competitive with other mid-sized sport utilities. diane eastabrook, "nightly business report," chicago. >> gharib: it also ruled you
could download without the permission. iphone owners can use apps without the apple blessing, but most predict that decisions won't have a major impact on the phone makers. >> hudson: yeah, time will tell, but unlikely to take a big chunk off of apple. a apple shares were weaker today. let's get you updated in tonight's market focus. >> tom: the fedex news erika reported on earlier helped the market deliver for shareholders today. all three of the major indices closed at their highest levels of the day. transportation stocks led the way, pushing the broader industrial sector up the most compared with the major sectors. the i-shares dow jones transportation exchange traded fund jumped almost 3% thanks to the bullish outlook from fedex. since the july low for stocks, this transportation fund has put in a double-digit return. here's how the transportation fund stacks up again a big financial fund and the dow jones industrial average since the
market low on july 6. transports have put in almost twice the rally as financial stocks and the dow industrials. i.y.t. is up almost 15%, compared to 8% gains for the others. the fedex news we had on earlier fueled a 5.5% rally in shares of f.d.x., leading the sector. this is a seven-week high. airline stocks got into the buying act too. this is a new high for continental, a one-month high for a-m-r and a one-week high for delta. each saw lighter-than-usual volume, though. onyx pharmaceuticals plans to turn in a new drug application before the end of the year for a treatment of a blood cancer. this comes after reporting positive results from a midstage drug trial. this optimism was a shot in the arm for onyx shareholders. the stock jumped 21% on more 10 times its normal volume. this stock was at a 52-week low earlier this month. this experimental treatment for multiple myeloma is the firm's lead drug in development.
it wasn't the only biotech stock jumping, genzyme saw follow- through buying from friday on more buyout chatter. if genzyme is on any company's buy list, it keeps getting more expensive. shares were around $54 friday morning, tonight they're above $67, a 24% return in two sessions. here's the one-year on genzyme, clearly at a new 52-week high. the buyout talk first centered around sanofi-aventis as an interested party, but analysts also speculate genzyme would fit in at glaxosmithkline and johnson & johnson. for sanofi, five of its eight best-selling will have generic competitors within two years. the "wall street journal" reports glaxo has expressed interest in genzyme. of the three, johnson & johnson has the most cash on its balance sheet, about $18 billion. those better-than-expected new homes in june helped support
buying of home building stocks as measured by the homebuilder exchange traded fund, the group is at new five-week high. today's volume was slightly below average. pulte group led the way, pulte reports earnings a week from wednesday. k.b. home saw twice its usual volume on today's rally. a move over $16 per share for lennar would break it out of the range its been in for two months. the home builders need to get their supplies someplace. home depot was among the top four best-performing dow components, rallying more than 2.5%. and competitor lowe's saw a bigger move, up 3.25%. quarterly earnings for both lowes and home depot will be in two and a half weeks, on the same day, august 16. you've heard the talk around b.p., but its partner in the well that had been leaking, anadarko petroleum, announced a new offshore discovery today. this one in the deep waters off the coast of ghana.
shares of a-p-c closed up almost 4%, but saw very light volume despite the new discovery. volume was a third of normal. the stock is down by a third since the deepwater horizon disaster began. anadarko earnings are due next week. finally, reported better than expected earnings after the close tonight. one to watch for tomorrow's action, profits dropped from last year yes, but still better than $0.16, better than estimates. new projects were up 38%. shares were up as much as 2% after the close. that is tonight's market focus.
>> hudson: having more choices is a good thing, right? well, not necessarily when it comes to money. when confronted with lots of investment choices, a common reaction is to freeze up and do nothing. in tonight's "your mind and your money" the cost of too many choices. barry schwartz, a professor at swarthmore college, the author of "the paradox of choice" and he joins us from berkeley, california. welcome to "nbr". >> great to be on. >> hudson: you write about choice overload. what is that when it comes to investment choices? >> well, i can't put a precise number on it, but choice overload is when people have too many options to choose from and the way we know that people have too many options is that they end up choosing none. >> hudson: it is particular to money decision or does this happen all the time? >> all the time, trivial things like buying, you know, pair of sneakers or a flavor of jam,
important things like trying to decide who to -- you know, what to marry or what job to take, it happens across the board. >> hudson: we see this a lot with 401(k) investors and one choice that people struggle with is deciding how to invest. the 401(k) money. the average number of funds is 18, and the average investor in the plan holds just four. so is 18 funds in a plan too many? >> i think there's good reason to think it is too many, and there's research that shows that the more options you give employees, the less likely they are to sign up. so you think you're doing them a favor by giving them 50 or 100 funds to choose from. every fund you add, slightly decreases the chances that they'll do it. what they do is they say i know i should do it, i'll decide tomorrow. >> hudson: if there's so many choices out there, at what point is it right for somebody to decide to let somebody else, let a professional make their decisions for them?
>> i don't know -- look, if you happen to be a fan of do -- assessing financial opportunities then you may roll up your sleeves and say, let me at it, i love it. most of us are not that way. if you think you're going to do it on your own you're kidding yourself. if you end up making bad decisions based on the wrong assessments because it's just too complicated. >> hudson: some behavioral finance experts advocate nudging people. how do you make that work? >> you can't legislate how many mutual funds are offered. they'll offer too many. when they offer too many funds people are likely to do nothing. so you arrange the retirement plan so what when people do nothing, they are participating. so the default, what happens when you do nothing, you're in the plan. you have to do something, sign a form, to opt out. when you do that, you roughly double the rate of participation of employees in the 401(k)'s.
>> hudson: as you consider ideas and approaches for how people approach these kind of decision, whether or not they're nudged in one direction or another, is there an optimum number of choices? >> there are a handful of studies that are done that suggests the onty mall numbers are between 11 and 12. but it's where the domain in question involved trivial stuff, like whether or not to buy a fountain pen or gift box. whether that magic number of eight to 12 applies when talking about mutual funds and other really consequential things is anybody's guess. >> hudson: professor, we appreciate the insight and thanks for joining us. >> thank you. >> hudson: professor barry schwartz, from swarthmore college, author of "the paradox of choice". >> hudson: we'll see if the investment behavior is passed along in our genes. >> susie: here's what we're watching for tomorrow.
quarterly results from aetna, dupont, massey energy and office depot. we'll see the s&p/case-shiller home price index for may, and the conference board issues its consumer confidence index for july. also, our "word on the street" looks at three under the radar stocks. each one is tied to apple. >> gharib: an arbitrage panel raymond james must buy back $2.5 million from an investor who bought them just as the credit market was collapsing. now, the investor claims he wasn't warned of the -- that the bottom was falling out and ended up stuck with worthless investments. raymond james says that the investor was aware of the risk. it has been a source of complaints. >> hudson: thousands of charities are getting a break from the tax man.
the i.r.s. says there are more than 300,000 nonprofits that could have lost tax-exempt status because they missed a paperwork filing deadline in may. that deadline has now been extended to mid-october. a list of charities that could be affected is on the i.r.s. website. losing tax exempt status means those charities would no longer able to get tax deductible donations. euquu >> susie: revised estimates show the u.s. budget deficit topping
$1.4 trillion this year. while it's difficult to see the deficit substantially shrinking until the economy recovers, alan blinder has some suggestions. he's a professor of economics at princeton and former vice-chair of the federal reserve. subtle, counterintuitive messages don't work well in public debates, which is too bad, because the right policy for the federal budget deficit today is both subtle and counterintuitive. lets start with the easy part. the deficit is too large, just as everyone says, but what, exactly, does that mean? there are two correct answers. first, today's federal deficit is so huge-- over $1.5 trillion in the current fiscal year-- that we cant keep it up very long, but, here's the first subtlety: we can keep it up for a while. after all, the treasury is having no trouble borrowing vast sums at very low interest rates today. the second, and more important, correct answer is that the budget is on an unsustainable long-run path-- meaning that current trends cannot continue indefinitely.
eventually, taxes must be raised and the spending curve must be deflected downward, not one, but both. but the second subtlety is that this is the wrong time to do either. with the economy so weak, we don't want the government to cut back any time soon. now for the counterintuitive part: the right fiscal policy would increase the deficit today, but then reduce it sharply and steadily in the future. unfortunately, selling that message politically is like convincing people that the best way to travel south is to start off walking north. so we get what we have: an unenlightened public debate. as i said: its too bad. im alan blinder. >> tom: finally tonight, if you like italian food, your favorite taste may be in trouble! herb growers say there's a fungus spreading in the nation's basil crop. basil is a popular ingredient in italian and thai cooking. plant experts say the crop is being plagued by something called "downy mildew fungi," which shows up in yellowing
leaves. so far the blight has been manageable, and commercial crop prices haven't started to rise, but there are concerns about next year's crop. one thing not to be concerned about, susie, experts say this fungus poses no risk at all to human health. we may have to adjust the spaghetti recipes if it rises. what are we going to do without our comfort food? >> gharib: i'm susie gharib and thank you for watching. have a good night. >> hudson: i'm tom hudson, thanks for tuning in. we hope to see you tomorrow. "nightly business report" is made possible by:
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